The Emergence of Electric Vehicles

Mar 25, 2021 | Swing Trading the Electric Vehicle (EV) Market

History of Electric Vehicles

First things first, what exactly are EVs? Electric vehicles, also known as plug-in vehicles, derive their power from electricity. They must be charged through an electrical source since they do not run on gasoline. Most of today’s electric vehicles    have a range between 50 and 300 miles before they will need to be charged. Cutting-edge technology continues to try and push this range higher. The time needed to complete a charge and distance per charge has become two of the main differentiators    between competitors.

Electric vehicles aren’t new. The very first electric car was built in the 1800s. At that time, manufacturing electric vehicles was very expensive. They also had a low top speed the charging range was not nearly long enough. Because of these noted issues,    the EV market never really took off until recently.

Types of EVs

Plug-in electric vehicles (PEVs) are segmented into 2 main groups:

o  Battery electric vehicles (BEVs)

o  Fully electric vehicles with rechargeable batteries and no gasoline.

o  These are zero-emission vehicles and do not generate air pollution.

o  Plug-in Hybrid Vehicles (PHEVs)

o  These have both an engine and an electric motor.

o  These are different from standard hybrids because they have a much larger battery that’s able to be plugged in for acharge.

o  These vehicles can drive anywhere from 10-40miles before their gas engine provides additional fuel assistance.

 

Most Common Electric Vehicle Batteries

There are four major batteries used in electric vehicles and hybrids:

1.     Lithium-Ion

2.     Nickel-Metal

3.     Lead-Acid

4.     Ultracapacitors

Weekly Swing Trades

PNRG (Prime Energy)

October 2, 2022

Entry Price:

80.62

Stop Price:

76.85

Target Price:

88.04

Time Frame:

1 Week Hold

Expecting a short-term bump after a recent OPEC+ announcement regarding the a supply constraint to oil. The constraint would result in ~1M less barrels of oil per day, which should cause a price jump. Low RSI and bouncing off our 250 day moving average, both hallmarks of a good swing trade.

DV (Doubleverify)

October 2, 2022

Entry Price:

27.75

Stop Price:

26.75

Target Price:

29.00

Time Frame:

3 Week Hold

Using our moving averages heavily on this swing trade, look for continued strength as we try to notch out a 6-8% gain. Specifically, we are taking advantage of of a recent cross over in the 50 day moving average. Last week closed down, so wait for confirmation of a reversal.

EV Market Cap

In 2019, the global electric vehicle market was valued at over $162 billion. Estimates project the EV market will swell above $800billion by the year 2027. From 2017 to 2018, global sales of electric vehicles rose by 65%, which equated to over 2 million cars. Estimates are projecting that EVs will be 10% of all global vehicle sales by 2025 and could make up nearly 60% of all car sales by 2040.

In 2020, electric vehicles made up nearly 3% of cars on the road. With an addressable market like that, you can see why investors are excited. While 3% is still very small, in 2015, electric vehicles made up only half of a percent of the market. You can see that adoption and growth have both been accelerating.

Tesla’s Dominance

As the first real EV manufacturer in America, Tesla has been on a meteoric run for the last 3 years. Tesla has also benefitted from being the first mover in the United States, but the competition is quickly expanding. Tesla has returned over 1300% profit to early investors who bought shares in 2016. It's no wonder everyone is always looking for the next Tesla!

In 2020, Tesla sold just under 500,000 cars which brought their revenue annual revenue over $30 billion. Despite their recent success, Tesla’s market share in the US dropped from 81% to 69% in 2020. Ford Motors, along with several other manufactures are said to be taking market share.  

International Markets

The European markets have been one of the leaders of early EV adoption. That’s not too surprising as many of Europe’s most prosperous countries also have the highest prices for natural gas. Switzerland is a great example of this and so are France and Sweden.

Europe had more than 3 million plug-ins EVs and commercial vehicles circulating in 2020. Europe accounts for 25% of the global EV stock, second only to China. Despite the global pandemic affecting all car buying for2020, Europe was still able to surpass 1 million annual EV sales.  

In 2020, China led the world with over 1.3 million electric vehicles sold. China is also the largest EV maker in the world. China has started to prioritize not just recreational EV use, but also commercial vehicles as well. China continues to dominate the commercial vehicle and electric bus industry. In 2020 they had nearly 500,000 electric buses on their roads.

Benefits of EV

With an increased focus on climate change and the environmental effects of gas-powered engines, EVs have been gaining popularity over the last decade.

There are many benefits to EVs including:

1. EVs are better for the environment. Since they don’t have an exhaust system, EVs have the immediate benefit of helping to reduce emissions. All-electric vehicles produce zero emissions which have a direct impact on our planet's air quality.  

2. Electricity can be used as a renewable resource while gasoline cannot. Electric cars can be powered through natural resources like solar and wind.

3. EVs require less frequent maintenance since they don’t need oil to operate.

 

Consumers have been enjoying the idea of lowering their own maintenance costs while also becoming more environmentally conservative. There’s also another driving factor in the EV craze as of late, and that’s legislative tax breaks and incentives.

Incentivizing EV Acceptance

As we’ve discussed, electric vehicles are a more environmentally friendly alternative to traditional gas-powered cars. Due to its long-term benefits, there have been multiple programs and tax incentives implemented to encourage the use of EVs.

In 2020 under the GREEN CAT, qualifying vehicles were eligible for up to $7000 in tax credits. The larger the battery within the vehicle, the more money a buyer can claim on their taxes. This tax credit was originally capped at 200,000 vehicles per manufacturer. This provision has been rewritten to now set a cap at 600,000 vehicles. When automakers reach 600,000vehicles sold, the carmaker can reduce credits by 50% for one additional quarter.

The GREEN ACT also helps EV buyers. Consumers may claim up to a $2500 tax credit when purchasing a preowned electric car. The car must beat least 2 years old and may not exceed a total price of $25K. The GREEN ACT also provides support for commercial EV use. Large fleet buses and adjacent vehicles are also eligible for a credit of 20% of the sales price for vehicles over100K.

Biden Administration

We knew the environment was going to be a key agenda item for Biden. After being sworn in as president, one of the first major actions he took was to sign a bill that will replace the entire federal vehicle fleet with EVs. This would involve replacing over 645,000 vehicles with electric-powered cars. No further timeline has been given, but it has certainly added even more incentives for EV manufacturers.

   
       Chart above highlights the 52-week run for two popular EV based ETFs. Tickers: DRIV & KARS

 

Investing in Electric Vehicles

There are many ways to invest in the rapidly expanding EV market. Here are three main ways to try and profit from the growing sector.

Car Manufactures

·       The most common way many investors chose to gain exposure to EVs is through the actual car manufacturers.

·       As previously stated, the US EV market is expected to sell 6.9 million cars by 2025, and that number could easily end up much higher!

·       EV sales are projected to rise by over 70% in2021 alone.

·       Popular stock ideas: Tesla, NIO, Volkswagen & BMW, just to name a few.

Charging Stations

·       Charging stations are another way for investors to get in on the EV craze.

·       Much like gas stations today, as EV sales increase, so will the need for charging stations.

·       In February 2021, the US had just under 100,000 charging stations for electric vehicles. A large proportion of those resides in the state of California.

·       Popular stock ideas: Charge Point, Blink Charging, Shell & EvGo among others.

EV Battery Makers

·       Batteries have a major impact on the charging capabilities of electric vehicles.

·       For EV expansion to hit its growth projections, we'll need to increase the production of batteries by at least 70%.

·       Experts predict the demand for lithium will double over the next 5 years.

·       Popular stock ideas: CATL Technology, Yunnan Energy New Material, Albemarle & Plug Power

Summary

In conclusion, it’s easy to see why investors are so excited about the future of electric vehicles and EV stocks. Currently, electric vehicles make it up less than 10% of all motor vehicles. It’s clear EV stocks still have a long way to run! With    a concerted effort to become more environmentally friendly and with several tax incentives in place, electric vehicles are here to stay.

There are many ways to invest in the expansion of EVs, but investors should understand this transition will be taking place over the next several decades. With that said, long-term investors might be interested in opening positions today with an eye toward    future long-term profits in the EV market.

The author does not own any of the stocks listed. This article should be used for educational purposes only. No stocks mentioned should be interpreted as formal recommendations from The Swing Trading Club.

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Weekly Review

Market Performance- Week of 09.25.2022

Recent Winners

SBUX (Starbucks)

SBUX (Starbucks)

Entry Price:

85.00

September 11, 2022

Price at High:

89.90

Return for Members:

5.76%

Timeline:

2 Month Hold

Strong momentum over the last few weeks. Watch for a mean reversion, but if moving averages stay consistent look for an early play to open the week.

PNRG (Prime Energy Resources)

PNRG (Prime Energy Resources)

Entry Price:

83.20

September 4, 2022

Price at High:

100.00

Return for Members:

20.19%

Timeline:

3 Week Hold

PNRG had a drawdown to historical levels of support (around the 100 day moving average). Looking to make an entry in the coming days as we also have macro tailwinds with the energy crisis in Europe.

PYPL (Paypal)

PYPL (Paypal)

Entry Price:

87.00

August 28, 2022

Price at High:

103.00

Return for Members:

18.39%

Timeline:

4 Week Hold

Playing off the dip in June, we're starting to see momentum as the 50MA is crossing over the long-term averages. Look to for momentum to continue and an early entry on Monday.

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